Not sure what you mean by "probably XTR". New chain and new RD may or may not be needed. There may be enough room in the current RD and enough slack length in the chain to fit a 32T. In any case, secteur compact is 8-speed and parts should be relatively cheap:
Cassette: $22
Chain: $16 for brand name, could go lower
RD: this one should work: $20

I suggested 12-32 because, in my limited experience, it usually works without getting a mountain RD. If you go for mountain RD, might as well get 12-34.

I looked at your RD link and it's an 11-32, not a 12-32.
Although i'm not splitting hairs with the 11 vs 12.

If that RD would work (or even better, my own!) that cassette seems like a decent option, however it is $30. - Again, not complaining considering to upgrade to a 9 or 10 or 11 speed is easily over 100 bucks.
Another thing I need to consider is, either summer 2014 or sometime in 2015 (at the latest) I intend to move to South Florida. The land of the flat terrain. Currently I'm in NY.
It might be better to just wait and suffer, keep losing weight, work on criterium related training and general base miles instead of climbing that I'll never be able to do (especially when I move). Hmm, decisions decisions....

Your aiming in a lot of directions, and flopping around in red herring.
Like others have noted, said - doing more climbing does help, but it's not going to improve dramtically until you do some other things.
(you haven't mentioned how tall you are - so we don't really have a way to assume/compare your level of 'lack of fitness') if you're carrying whatever amount of extra weight, that stuff is an anchor. A primary focus should be losing the 'easy' weight... We can get picky on the 'easy weight definition', except most all of us know what chunk of us is really very discreptionary because of diet and inactivity, and what is really the hard remaining amount which requires strict nutrition and training.
I know a guy who rides almost every day, (because I see him...), and yet 6 yrs after I got to know him, he is still way over weight, and still obviously well under his 'recreational rider potential'. He loves riding his bike - but the weight thing is not his obvious focus. I never bring it up when we do talk, we just talk bikes and riding the valley.
Why am I bringing this up? Becase his 4K miles are 'fun', rewarding to him, but not performance improvement miles. He still needs to lose weight just to improve his general health (he's quite overweight). Because 'excess weight' is the #1 thing holding most all of us back from reaching our cycling goals.
Prioritize your goals - make the weight lose #1
Along the way, as the weight lose is being handled, add other goals.

I know your ride, before being a Left Coaster now, I was for many decades an Easterner (still am by demeanor), the areas from Bergen county to Sussex County, Rockland County to Orange County and up thru the Catskills were my frequent play and training grounds.

Your gearing is really fine for that area, your current fitness is not.
Some guys can 'spin' up a climb like goats, other mash their way up, and many do something inbetween. Where you fit at any point is a matter of measure. The test you did was quite thorough, but didn't give you any info you could use. VO2max is not something of daily useful info. The VAT value is clearly NOT your LT/AT. MAX heart rate will vary depending on the exercise, and again there's no relevency top knowing it.

Your Q - what's going on here? When you go anaerobic, you generally can;t hold it for very long - usually less than a 1 minute. World class athletes train hard to up that limit by very small increments.
When you do go 'anaerobic', the degree to which that happens determines how much you have to back off just to get back to an aerobic state. In other words, you slow down, way below where you might normally be able to ride, just to recover from the 'hurt'. Your best performance will happen at a steady efoort state, somewhere below that 'zone' of anaerobica. It's a 'region' not a line. Defining that region is an important performance/training tool.
If you can go at 130 bpm for an hour, you're not close. If you have to stop, you're well over.
If you want to use the HRM best, then find a way to better define your anaerobic region.

1. Lose weight
2. climb more often and use a climb you can hit regularly, within a reasonable distance so you can do it once a week.
3. Measure your performance - I time my weekly climb. So weeks I go faster and do a personal best, other weeks I'm cooked and off the time. Experiment with cadence and gearing, under different steepnesses and conditions.
4. Intervals, though really awful if done properly, are a primary tool to improvement in all areas of cycling, especially if you have time limits. Add some interval training.
5. If you ride 5 daya a week, do your weekly hillclimb at least once, like religion. Maybe add a day of intervals. Do a Day where you hit a high steady effort for most of the ride (with a warmup and cool down) and get a 'recovery' day or 2 - recovery is your easy day - very easy - go for a bimble, smell the roses, enjoy the universe.

But this is all variable. If you end up in a rut, vary it up some. If you feel over-fatigued and have trouble sleeping, don;t be afraid to do 4 'recovery rides' in a row.

But do have 'religion' for 2 things, determined weight lose efforts (at whatever rate suits you...), the weekly hillclimb - no excuses (except injury or road closure).
It gets easy to become lost in the 'science' and forget he very basic things. Cycling performance is as much 'heart' as it is 'head'.

Climbing? Is this a strength or aerobic capacity problem?
 

Cyclezen. Like the post. Ah...Anaerobica, you can visit but never stay.

I'm 22, 5'9, 194 was my best weight (3 days ago).

I don't know if you read my latest reply, but I plan to move to Florida in 18-24 months, so I'm debating if I should do more interval / criterium style training instead of hitting climbs weekly.
However I assume doing climbs will help my criterium fitness in its own way.

It says $21.67 to me. Also, cassettes are consumable. They take a while to wear and I don't know how much you ride (you might get 5-10k miles out of one) but eventually you will need a new cassette. You could get a 11-32 now, wear it out and put your original 12-28 back on when you move to FL.

no I didn't, at the time I posted - I do those lengthy tomes over some time, while I'm working on other things - I have multiple machines going at once - and when I have a free moment I pop over to BF (or finish a post).
Everything helps, but I think you'll find Crit type 'practice' (done in a group) is closer to intervals... Climbing is closer to 'tempo' training. But everything over laps...
you brought up the climbing topic - the newly added "18-24 months for a move" is just rationalisation.
“ingenuity was apparently given man in order that he may supply himself in crises with shapes and sounds with which to guard himself from truth.”
― William Faulkner, Light in August

Sorry, that was my fault. I tried to add in some related experience of my own -- but it took off on it's own. Sorry.

But I still think that that experience is relevant. Climbing and the ability to climb brings together a whole system of different pieces:
-- Hardware: the weight and efficiency of the bike as a whole as well as it's gearing.
-- Mental factors such as confidence and determination
-- Physical factors such as strength, weight of the engine, neuro (which usually works pretty well), and fuel supply (as in how well the rest of the body supplies the stuff (like O2 and carbs) the muscles need in order to create the energy they need to do their job.

The trouble is, it's ALL of them, but frequently we over focus one or two of them.

I suspect for you, there are several factors that could be improved. But improving just one or two of them may be enough to get you up that hill. And, like several have suggested: "upgrading" the bike by changing its gearing could help. I know I go overboard with my bikes to compensate for a lack of my physical abilities. You do what you have to do to get up that hill! -- but each month that hill gets a little smaller...

But, that's why we need forum's like this: if it were easy we would just jump on a bike and go wherever we wanted as fast and as far as we wanted.

IMO, you need to rethink some of this. Climbing is about power to weight ratio. All else is secondary or tertiary. If one is too heavy, one is dead on arrival at the start of a climb. Power is a function of the ability of the body to consume oxygen for a given force. Generally, the limiter for new riders is heart stroke volume and channelling blood. Beginners do not have enough HSV and their body floods blood everywhere. Riding more at higher effort and higher cadence taxes the cardio system and improves HSV and focuses blood flow to power producing areas only. This takes about 2 years to develop.

Another factor is neuro muscular - force applied. It is very difficult to be a good climber IF one does not use the glutes properly. And if one has a rounded back, raised shoulders, hard grip on the handlebars, more than likely, they will generate power from their quads and back - burning quads and a sore back. The way to get the proper posture and muscle firing sequence is to lower the shoulders, squeeze the upper back muscles together and take a very loose grip of the bars and take all the weight off your hands. That will engage the glutes. Once that is done, return the weight to the hands but feel the correct posture in the back. Go back and forth (unweight the hands momentarily) until the posture becomes second nature. This will take some time - weeks and months.

Once again heavier riders will struggle with this since they are carrying too much weight in the stomach / upper body such that their core will tire quickly and they will want to return to a rounded back and raised shoulders with weight on the handlebars.

This technique applies to all types of riding not just climbing but is more crucial to being a good climber. If you primarily use your quads, they tire too fast and do not get as good a blood flow as the glutes which are also the largest muscle group of the body.

I agree, it is largely a matter of [sustainability of] the power to weight ratio of the engine. And, your post listed most of the same factors that I mentioned.

But, it's also a function of mental factors such as knowing the correct techniques as well as confidence and determination. If you lack them, a favorable power to weight ratio in the engine MIGHT be enough to compensate. But, perhaps not...

And, it is also a function of the bike: There are a few hills around here that even the best climbers could not climb on a single speed beach bike.

I still stick to my hypothesis that successful climbing requires a whole range of factors -- and being strong in one of those factors can compensate for being weak in others -- and vice-versa.
... The guy who manages my LBS could probably climb Mt Everest on a tricycle loaded with a load of bricks on his back.

So that's a nice way of saying HTFU and hit the hills?

actually, no - not HTFU
there's balance to getting stronger/better/fitter - the basic concept of HTFU is less about balance, than it is about going out and hammering some rides. I try not to use HTFU, except when it's obvious the rider is finding ways to rationalize their performance down to equipment. Not saying that you are
Once you do move to FLorida, you'll loss the easy opportunity to get the special benefits of doing climbing.
You have some good info here from some good posts. Patience and determination. Patience to work steadily to improvement. Determination to make changes which will allow you to improve towards your goals.

Because I tend to work it the other way: figure out what gearing I need by using calculators and then spec the components. XTR is good equipment. Last forever on a road bike and use any cassette. If the chain was properly fitted to a 28T cassette, it will not run big-big on a 32, which means it's just a matter of time until destruction of the new RD and probably a wheel problem and maybe a frame problem. In the long run, cheaper is not usually better.

I don't doubt that XTR is good equipment. But the idea of putting a $100 RD on a $800 bike seems questionable. More importantly, current XTR is Dyna-sys, which makes it incompatible with Shimano's road shifters.